Retail sales up 4.5% in December; merchants say discounts hurt

Wary holiday shoppers forced retailers to heavily discount items during December, ultimately handing merchants decent sales but raising worries about consumer spending in the new year.

Major chain stores posted a 4.5% sales increase in December compared with the same month a year earlier, beating analysts’ expectations of a 3.3% rise. according to Thomson Reuters’ tally of 17 retailers.

But analysts said many retailers sacrificed profit by aggressively marking down merchandise to lure people into stores. Strong sales did not always translate into a blockbuster holiday season for some companies.

Several chains, including J. C. Penney, Target and Kohl’s, lowered their forecast for fourth-quarter profit on Thursday, warning that larger-than-expected discounts may affect their year-end results.

Top performers were a mixture of high- and low-end stores. Costco Wholesale Corp. led the way with a 9% bump, while upscale department store chain Nordstrom reported an 8.6% jump. Off-price retailers Ross Stores Inc. and TJX Cos. both said sales rose 6%.

Other retailers did not fare as well. Struggling teen clothier Wet Seal said sales fell 9.7%, while Target Corp. said sales were flat.

The mixed showing during the crucial holiday season indicates that shoppers have not completely shaken off worries about the economy, industry watchers say. The last-minute maneuvering over the looming “fiscal cliff” convinced some shoppers to hold onto their dollars.

Merchants are now settling into the usual post-holiday lull, with many lowering prices even further to clear inventory and prepare for the next spike in consumer spending, typically before Easter.

Results were based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of store openings and closings.

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